PSX sees investor optimism fade as profit-taking trims early gains

The capital market saw late-session volatility on Tuesday, with early gains driven by buying momentum before mid-session profit-taking trimmed advances. Despite this, the market closed in the black with moderate gains.

Investor sentiment was buoyed by optimism over fiscal incentives in the upcoming federal budget and expectations of an expanded IMF loan program. However, as fund-driven buying waned by mid-session, profit-taking set in, leading to a more measured close.

The Pakistan Stock Exchange's (PSX) benchmark KSE-100 Index gained 197.98 points (0.17%), closing at 114,528.08. The index climbed to an intraday high of 115,889.60 before settling lower, reflecting profit-taking and investor caution.

"The euphoria from yesterday's move subsided as fund buying started to taper off and sellers regained momentum,” said Ahfaz Mustafa, CEO of Ismail Iqbal Securities, commenting on the shift in momentum.

“The market will probably stay range-bound until it sees new developments on the IMF front and circular debt front," he added

Meanwhile, the IMF’s technical team on climate finance initiated discussions with Pakistani authorities on Monday, exploring the potential imposition of a carbon levy in the upcoming budget. The negotiations are part of efforts to augment the existing $7 billion EFF with an additional $1.2 to $1.5 billion under the Resilience and Sustainability Facility (RSF).

The IMF review mission is expected to visit Islamabad from March 4, engaging in 10 to 12 days of discussions on various economic sectors before presenting its report to the IMF Executive Board within 4 to 6 weeks, contingent upon a successful staff-level agreement.

If finalised, Pakistan’s total IMF funding could increase to between $8.2 billion and $8.5 billion.

Ahsan Mehanti, managing director of Arif Habib Commodities, highlighted the drivers behind the bullish activity observed earlier in the session, saying: "Pre-budget rally witnessed as investors weigh finance minister's hints over a construction package in the federal budget, robust economic indicators for remittances, inflation, and foreign exchange reserves, as well as hopes for $1 billion IMF climate funding approvals ahead of the IMF review under EFF [Extended Fund Facility].”

He added, “Higher global crude oil prices and government deliberation over the privatisation of SOEs played a catalyst role in the bullish activity at PSX."

The finance czar also reiterated the government’s commitment to expanding the tax base, boosting foreign exchange reserves, and facilitating business growth.

Addressing journalists in Lahore on Sunday, he emphasised the rising number of remittance senders—now at 35 million—and the increasing inflows into Roshan Digital Accounts (RDA).

Aurangzeb further stressed the government’s support for the construction industry while ensuring to curb speculative activities in the real estate sector.

Speaking at a separate event in Faisalabad a day earlier, he reaffirmed that Pakistan’s economy is progressing due to structural reforms, highlighting the lower policy rate, single-digit inflation, and growing tax revenues as signs of economic stability.

The benchmark index closed at 114,330.10 points on Monday, gaining 1,529.17 points (1.36%), after hitting a low of 111,857.34 earlier in the session.

As the PSX moves into a more range-bound phase, analysts suggest further clarity on IMF negotiations, circular debt resolution, and budget incentives will determine the next market direction.